Tennessee Pharmacists Association

May 31, 2019

On May 24, 2019, Governor Bill Lee signed into law one of TPA’s top 2019 legislative priorities, comprehensive pharmacy benefits manager (PBM) reform. The enactment of this legislation, Public Chapter 470, will bring about several very important changes to the way in which Tennessee-licensed PBMs operate in Tennessee.

TPA members were instrumental in advocating for the passage of this law, and TPA greatly appreciates the work of bill sponsors and members of the Tennessee General Assembly for recognizing the importance of, and need for, these changes. The new law is intended to provide pharmacies and pharmacists with added audit protections, more transparency and clarity in fees assessed by PBMs, and new contracting rights. Scroll down for more information about the important PBM reform changes that Public Chapter 470 brings to Tennessee.

Your voice was heard in Nashville! Below is a complete list of the House and Senate sponsors and co-sponsors of this important legislation. TPA would like to specifically recognize and thank Representative and House GOP Caucus Chairman Cameron Sexton and pharmacist and Senator Shane Reeves, as well as the members of the Tennessee General Assembly, for supporting this important TPA priority legislation!


Public Chapter 470: Summary of Important PBM Reform Changes


TPA has prepared a detailed printable PDF of the following changes, which can be accessed HERE. TPA will also be updating the information on TPA’s Practice-Based Resource on Pharmacy Benefits Manager (PBM) Laws to reflect these changes.


ENHANCED PHARMACY PROTECTIONS AGAINST AUDITS AND RECOUPMENTS

New Language in TCA Section 56-7-3103(a)(3):

(3) Any clerical or recordkeeping error identified during an audit, such as a typographical error, scrivener’s error, omission, or computer error, does not, in and of itself, constitute fraud or intentional misrepresentation and must not be the basis of a recoupment unless the error results in an actual overpayment to the pharmacy or the wrong medication being dispensed to the patient. Notwithstanding any other law to the contrary, no such claim is subject to criminal penalties without proof of intent to commit fraud;

What does this change mean for pharmacists

Pharmacists and pharmacies need protections against PBM audits and recoupments related to clerical or recordkeeping errors, including audits of claims for omission of information. Previous audit law established that these types of clerical and recordkeeping errors did not constitute fraud but did allow PBMs to recoup claims from pharmacies. The new law establishes that clerical or recordkeeping errors, including omission of information, do not constitute fraud and must not be the basis of recoupment, except in cases of actual overpayment or the dispensing of the wrong medication.

RIGHTS FOR PHARMACISTS OR PHARMACIES TO SUBMIT AMENDED CLAIMS TO CORRECT CLERICAL OR RECORDKEEPING ERRORS IDENTIFIED DURING PBM AUDITS

New Language in TCA 56-7-3103(a)(7):

(7) A pharmacist or pharmacy must be allowed the length of time described in the pharmacist’s or pharmacy’s contract or provider manual, whichever is applicable, which must not be less than thirty (30) days, following receipt of the preliminary audit report in which to produce documentation to address any discrepancy found during an audit. A pharmacist or pharmacy may correct a clerical or recordkeeping error by submitting an amended claim during the designated time frame if the prescription was dispensed according to the requirements of state and federal law. If the pharmacist’s or pharmacy’s contract or provider manual does not specify the allowed length of time for the pharmacist or pharmacy to address any discrepancy found in the audit following receipt of the preliminary report, then that pharmacist or pharmacy must be allowed no less than thirty (30) days following receipt of the preliminary audit report to respond and produce documentation;

What does this change mean for pharmacists

Pharmacists and pharmacies should have the right to submit amended claims in response to clerical or recordkeeping errors identified during PBM audits. This new law adds language to existing pharmacy audit rights to allow pharmacists or pharmacies to submit amended claims to correct clerical or recordkeeping errors during audits performed by PBMs.

PROHIBITION ON RECOUPMENT OF COST OF DRUG FOR CLERICAL OR RECORDKEEPING ERRORS

New Language in TCA 56-7-3103(a):

(12) Any recoupment related to clerical or recordkeeping errors must not include the cost of the drug or dispensed product, except in cases of the following:
  (A) Fraud or other intentional and willful misrepresentation;
  (B) Dispensing in excess of the pharmacy benefits contract established by the plan sponsor; or
  (C) Prescriptions not filled in accordance with the prescriber’s order.

What does this change mean for pharmacists

Pharmacists and pharmacies should not be at risk of losing the cost of the medication, in addition to audit fees, for clerical or recordkeeping errors. This new law prohibits PBMs from recouping the cost of the drug or dispensed product due to clerical or recordkeeping errors, except in certain instances.

PROHIBITION ON PBMs FROM ASSESSING RETROACTIVE, NON-TRANSPARENT FEES ON PHARMACISTS OR PHARMACIES

New Language in TCA 56-7-3115:

A covered entity or pharmacy benefits manager shall not charge a pharmacist or a pharmacy a fee related to a claim unless it is apparent at the time of claim processing and is reported on the remittance advice of an adjudicated claim. This section does not prohibit a covered entity or pharmacy benefits manager from entering into an agreement with a pharmacy or pharmacist which includes prospective performance-based incentives and increases payment to pharmacies or pharmacists.

What does this change mean for pharmacists

Many fees (such as DIR, GER, BER, etc.) imposed on pharmacists and pharmacies by PBMs are not apparent at the time of claims processing and/or are not reported on the remittance advice of adjudicated claims. These fees are often assessed retroactively without any accompanying information or transparency, causing a problematic and unsustainable business model for pharmacies and pharmacists. This new law requires that all fees charged to pharmacies or pharmacists by covered entities or PBMs related to a claim must be apparent at the time of claims processing and reported on the remittance advice of the claim. This law ensures a more transparent process for any fees charged to pharmacies and pharmacists going forward. This law allows for covered entities or PBMs to enter into agreements with pharmacies or pharmacists for performance-based incentives if they are prospective and increase payment to pharmacies or pharmacists.

PROHIBITION ON PBMs FROM REQUIRING PHARMACISTS TO DISPENSE CONTRARY TO PROFESSIONAL JUDGMENT

New Language in TCA 56-7-3116:

A covered entity or pharmacy benefits manager shall not include any term or condition in a contract with a pharmacy or pharmacist that requires a pharmacist to dispense a drug or other product to a patient contrary to a pharmacist’s professional judgment.

What does this change mean for pharmacists

The professional judgment of a pharmacist is essential to patient care and must be protected. This new law provides added protection for pharmacists when deciding what is best for their patients by establishing that covered entities or PBMs are not permitted to include language in contracts which requires pharmacies or pharmacists to dispense a drug or other product which conflicts with their professional judgment.

REQUIRED NETWORK NOTIFICATIONS TO PHARMACIES OR PHARMACISTS REGARDING MATERIAL CHANGES TO CONTRACTS

New Language in TCA 56-7-3117:

A covered entity or pharmacy benefits manager shall disclose to a pharmacy or pharmacist in its network, at least thirty (30) days before the date the change becomes effective, any material change to a contract provision that affects the terms of reimbursement, the process for verifying benefits and eligibility, the dispute resolution procedure, the procedure for verifying drugs included in the formulary, and the procedure for contract termination. Nothing in this section prohibits a covered entity or pharmacy benefits manager from taking action without notice against a pharmacy or pharmacist in its network for a fraudulent claim or service.

What does this change mean for pharmacists

Any material changes to contracts between covered entities or PBMs should be communicated to pharmacies or pharmacists prior to those changes becoming effective. Contract changes made without prior notice can cause disruptions in patient access to pharmacist-provided care and may also create confusion for pharmacists and their patients. This new law establishes that covered entities or PBMs must disclose any material changes to contract provisions to pharmacies and pharmacists at least thirty (30) days before those changes become effective.

CONTRACT PROTECTIONS AND PROHIBITED PBM PRACTICES

New Language in TCA 56-7-3118:

(a) Each contract between a covered entity or pharmacy benefits manager and a pharmacist or pharmacy must be mutually agreed upon and must outline the terms and conditions for the provision of pharmacy services.

(b) A covered entity or pharmacy benefits manager shall not cause or knowingly permit the use of any advertisement, promotion, solicitation, representation, proposal, or offer that is untrue, deceptive, or misleading.

(c) Removal of a pharmacy or a pharmacist from the network of a covered entity or pharmacy benefits manager does not release the covered entity or pharmacy benefits manager from the obligation to make any payment due to the pharmacy or pharmacist for services that have been properly rendered prior to the pharmacy being removed from the network. Properly rendered services do not include any services related to a fraudulent claim or intentional misrepresentation.

(d) A covered entity or pharmacy benefits manager shall not engage in a pattern or practice of reimbursing pharmacies or pharmacists in this state less than the amount that the pharmacy benefits manager reimburses a pharmacy benefits manager affiliate for providing the same drug or dispensed product or service.

What does this change mean for pharmacists

Pharmacists and pharmacies need certain rights regarding their contracts with covered entities and PBMs, and covered entities and PBMs should be prohibited from engaging in certain practices, including the dissemination of untrue, deceptive, or misleading information or establishing a pattern or practice of reimbursing pharmacies or pharmacists in Tennessee less than they reimburse their affiliates. This new law establishes certain contracting rights for pharmacies and pharmacists and prohibits covered entities or PBMs from engaging in certain activities.


EFFECTIVE DATE AND APPLICATION OF LAW

Public Chapter 470 applies to agreements entered into, amended, or renewed on or after July 1, 2019. This new law is applicable to all commercial and private plans administered by covered entities and pharmacy benefits managers licensed to operate in Tennessee and regulated by Tennessee Code Annotated Title 56. Medicare and ERISA-exempted self-funded plans, which are regulated by the federal government, have been determined in district courts to maintain pre-emption over state laws.


Next Steps in the Fight to Fix Medicare Direct-and-Indirect Remuneration
Although the Centers for Medicare and Medicaid Services (CMS) ultimately failed to include proposed direct-and-indirect remuneration (DIR) reform language in its Final Rule, the fight to fix DIR legislatively is heating up. There are several federal legislative initiatives that TPA members should take action on today.
  • DIR reform legislation includes S. 640 and H.R. 1034 (Phair Pricing Act of 2019), and S. 988 and H.R. 803 (Improving Transparency and Accuracy in Drug Pricing Act of 2019). We need the entire Tennessee delegation to sign on to these bills and show their support for meaningful DIR reform.
  • Senator Blackburn also recently introduced S. 1532, which would require the Government Accountability Office to study the role PBMs play in the pharmaceutical supply chain and to provide Congress with appropriate policy recommendations.
  • The Senate Health, Education, Labor, and Pensions (HELP) Committee, led by Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA), released the Lower Health Care Costs Act of 2019 (read the summary), which is a bipartisan effort to reduce health care costs. Specific to pharmacy practice and PBM transparency, this legislation would enact several very important changes, including: requiring that plan sponsors receive a quarterly report on the costs, fees and rebate information associated with their PBM contracts; prohibiting PBMs from engaging in spread pricing, or charging a plan sponsor, health insurance plan, or patient more for a drug than the PBM paid to acquire the drug; and requiring the PBM to pass on 100% of any rebates or discounts to the plan sponsor. Email your comments on this draft legislation to the Senate HELP Committee staff at LowerHealthCareCosts@help.senate.gov by Wednesday, June 5, 2019, at 5pm ET.
TPA urges all members to contact your US Representative and US Senators to express your support for these important legislative initiatives. Members should also send a communication to Senators Blackburn and Alexander requesting that they sign on to a letter to President Trump expressing their disappointment in the lack of inclusion of DIR reform in the CMS Final Rule.